Which one of the following is not a feature of "Value Added Tax"?
A
It is a multi-point destination-based system of taxation
B
It is a tax levied on value addition at each stage of transaction in the production-distribution chain
C
It is a tax on the final consumption of goods or services and must ultimately be borne by the consumer
D
It is basically a subject of the Central Government and the State Governments are only a facilitator for its successful implementation
Correct Answer: Option D
Explanation
1. Statement (A) is a correct feature: Value Added Tax (VAT), as implemented in many countries including India (pre-GST), is typically a multi-point tax collected at different stages of the production-distribution chain, and it's usually destination-based, meaning the tax revenue accrues to the jurisdiction where the final consumption occurs.
2. Statement (B) is a correct feature: The core principle of VAT is that it is a tax levied on the value addition at each stage of transaction. Businesses pay tax on their sales but get credit for the tax paid on their inputs, effectively taxing only the value they add.
3. Statement (C) is a correct feature: VAT is an indirect tax. While collected from businesses at various stages, the economic burden is designed to be passed on through the chain and must ultimately be borne by the final consumer of the goods or services.
4. Statement (D) is not a correct feature: In the Indian context (pre-GST), VAT on goods was primarily a subject of the State Governments (State VAT). The Central Government levied other indirect taxes like Central Excise duty and Service Tax. It was not basically a Central Government subject with States acting merely as facilitators.